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Homeland Security OK Puts S.D. Firms on Alert

Homeland Security OK Puts S.D. Firms on Alert

There Are Questions Over How Department’s Spending Will Fall to Small Business


Staff Writer

Local small businesses may play a greater role in homeland security, now that Congress has elevated it to a Cabinet-level department. But the question remains how much.

The Senate voted Nov. 19 to create the Department of Homeland Security, which is expected to receive President George W. Bush’s approval. According to published reports, President Bush is expected to sign the bill into law sometime this week.

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The new department, with a $37 billion budget, will combine several federal agencies , the Secret Service, the Coast Guard, Border Patrol and the Customs Service, among others , into a single Cabinet-level department.

Mark Thiemens, dean of physical sciences at UCSD and one of the lead coordinators for homeland security issues locally, said the region as a whole will benefit. The strong military presence here assures the area will get a large share of Homeland Security Department funds, he said.

Small business likely will get much of the money that comes to San Diego. Most high-tech and biotech companies in San Diego are small firms , and these sectors will play a key role in homeland security, Thiemens said.

Also, Thiemens expects rapid deployment of new technology, and small companies are better poised to meet these challenges, he said.

Using a hypothetical example, he imagined that an enemy developed a new virus for biological warfare.

“All of a sudden, there’s a crunch,” he said. “You need a detection agent, you need an anti-viral, you need all sorts of things to respond to that right away. Sometimes being smaller makes you more flexible. You can take your work force and decide, ‘OK, We’re going to do this. And it’s all we’re going to do, and we’re going to do it fast.’

“It’s an outstanding opportunity for small businesses. It’s a great opportunity for the region.”

Risk Of Being Overlooked

However, one local expert warns that small businesses might not get their fair share of Homeland Security contracts. Jack Friery, an attorney who teaches government contract law at San Diego State University, had a few reasons to be pessimistic.

Friery noted the new department would bring together 170,000 employees from 22 different agencies, spending “a heck of a lot of money.” However, the bill’s authors gave the new department too much discretion to depart from standard government contract rules , bypassing small business, he said.

“They’re basically giving this new department a lot of latitude to deviate from a standard federal procurement system. A lot of these rules, they can almost make up as they go along,” Friery said.

Friery added that each federal agency is supposed to set aside some of its contracts for small business , roughly a quarter of all contract work. However, these set-asides are viewed as goals rather than mandates, and there is little enforcement of these provisions, he said.

In the case of the Homeland Security Department, it doesn’t yet have any set-asides at all, based on his reading of the bill.

Also, if a major federal agency is able to make up the rules as it goes along, it becomes more difficult for a small firm to get itself recognized as a contractor, Friery said.

“It makes it hard for a small business who’s not part of the system to break in because it’s hard to understand what the procurement rules are,” he said. “It helps the incumbents , the Lockheed Martins of the world, the Raytheons of the world, that are already in the system.”

Friery said that there is an overall trend to relax procurement rules. Already, the federal government uses “contract bundling” to save money, but many small firms lose out in the bidding process, he said.

“They’re kind of aggregating little contracts and medium-size contracts into these mega-jobs,” he said. “But it’s beginning to erode the possibilities for small business. The jobs are so big that the small businesses don’t have an opportunity to bid on them.”

Friery noted that the news for small business isn’t all bad. President Bush has announced his opposition to contract bundling.

Also, HR 4546, the Department of Defense Reauthorization Conference Report, includes several provisions to help small businesses participate in antiterrorism efforts by the Department of Defense. The bill passed the House of Representatives Nov. 12.

George Chandler is more optimistic. The district director of the U.S. Small Business Association said homeland security, and the strong military presence in San Diego County, both will create many prospects for small businesses.

“A lot of (homeland security) is going to be done through contractors. So there’s going to be lots of opportunities for contractors and small businesses to participate, if you’re in a business that can provide goods or services required for homeland security,” he said.

Chandler said government agencies honor their commitments to create set-asides for small businesses, and there are additional opportunities for women-owned and minority-owned small business. Also, when large firms get a contract, they are required to subcontract some work to small businesses, he said.

“There will be some opportunities and I would encourage the small business community to take advantage of them by learning what’s available,” he said.

Subcontract With Bigger Firms

Sources for information include the Procurement Technical Assistance Center or the local chapter of the SBA. Chandler also advised small firms to contact larger business for subcontract work.

Jim Conrad, technical coordinator for the procurement center, said the Homeland Security Department is so new, it hasn’t yet worked out its set-asides for small business. It’s too early to tell how much of a role small business will play in the department, he said.

However, he believes that once the department is established, it will set aside 25 percent of its contract work for small business , the same as the Department of Defense.

Conrad noted that many offices coming under the aegis of the Homeland Security Department already have contracts with small business. Shuffling the agencies around won’t change that, he said.

“The Coast Guard, which is under the Department of Transportation currently is buying items for their ships and boats,” he said. “I don’t see anything different from what the government is buying currently.”

Conrad added that the procurement center works with any small business to find a government office that could use its goods or services. That includes federal, state or local agencies, and possibly the Homeland Security Department, once it’s set up.


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